Thursday, 5 April 2018

Sin taxes and the poor

The Tories' regressive sugar tax begins tomorrow and so the Lancet (a student union magazine masquerading as a medical journal) is trying to seize the narrative by devoting a whole issue to the wonders of taxation. As with the Gates-funded Telegraph advertorial published last week, it frames sin taxes around the silly panic about 'non-communicable diseases'.

One of Bloomberg's minions has written the main editorial. Absurdly, he claims that sin taxes do not disproportionately hit the poor. On the contrary, he says, people on below-average incomes benefit the most from them.

A key reason why such taxes are unpopular is that they are
regressive. Excise taxes on everyday products almost invariably take a
greater share of income from the poor than from the rich. Taxes on
tobacco, fast food and soft drinks are doubly regressive because people
on below-average incomes tend to consume more of them in the first
place.

This is not a notion that is ‘outdated, misleading, or simply wrong’.
It is a demonstrable fact. In Britain, the poorest decile spend 34 per
cent of their disposable income on indirect taxes,
including 2.9 per cent on tobacco duty and 2.0 per cent on alcohol
duty. For the richest decile, the equivalent figures are 14 per cent,
0.1 per cent and 0.9 per cent respectively. There is no doubt that the
sugar tax will be similarly regressive when it comes into effect on
Friday.

If you were employed by one of the world’s richest men to lobby for
higher taxes on the poor, you might start to wonder if you were one of
the baddies. Summers’ editorial seems designed to help him and his
readers sleep easier at night by redefining the meaning of the word
‘regressive’ and engaging in some wishful thinking about the efficacy of
such policies.

About Me

Writer and researcher at the Institute of Economic Affairs. Blogging in a personal capacity.
Author of Selfishness, Greed and Capitalism (2015), The Art of Suppression (2011), The Spirit Level Delusion (2010) and Velvet Glove, Iron Fist (2009).

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."